AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2021 (3) TMI 563
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....#39;ble DRP erred both on facts and in law in partially confirming the addition made by the Ld. Assessing Officer ('Ld. AO') to the Appellant's income by issuing an order without appreciation of facts and law; 2. The Hon'ble DRP erred in partially confirming the addition of the income of the Appellant by holding that the international transactions of the Appellant pertaining to the provision of trade facilitation service transaction, receipt of interest on deferred payment transaction and provision of Business Support services do not satisfy the arm's length principle envisaged under the Act. In doing so, the Hon'ble DRP has grossly erred in agreeing with the Learned Transfer Pricing Officer's ('Ld. TPO's) action of: Common Transfer Pricing Objections - All segments 2.1. not appreciating that the Appellant had prepared the detailed contemporaneous Transfer Pricing documentation bona fide and in compliance with the Act and Income Tax Rules 1962 ("the Rules"); 2.2. disregarding judicial pronouncements in India in undertaking the transfer pricing adjustment; Transfer Pricing Objections - Provision of trade facilitation service characterised....
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....benchmarking a low risk bearing subject international transaction; 2.11. disregarding prior years' data as used by the Appellant in the TP documentation and holding that current year (i.e. FY 2008- 09) data for comparable companies should be used despite the fact that the same was not necessarily available to the Appellant at the time of preparing its TP documentation, and in doing so has grossly erred in interpreting the requirement of 'contemporaneous' data in the Rules to necessarily imply current year (i.e. FY 2008-09) data. 3. The Ld. AO has grossly erred by proposing to compute interest under section 234B, 234D and 244A of the Act. 4. On the facts and circumstances of the case and in law, the Ld. AO has grossly erred in initiating penalty proceedings under Section 271 (1) (c) of the Act." 2. Briefly stated the facts necessary for adjudication of the controversy at hand are : Louis Dreyfus Commodities India Private Limited (LD India), the taxpayer, a subsidiary of Louis Dreyfus Commodities Asia Pte Ltd., Singapore (LD Asia) is an India based trader of agri-based commodity products, such as, Crude Palm Oil, Coffee, Cotton, Soyabean meal, Sorghum and Maize....
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.... be in 'Category BB' and by using the data procured from CRISIL, proceeded to benchmark this transaction with the return earned by investing in the bonds of Indian companies having BB credit rating and determined the interest rate of 17.24% to be at arm's length and thereby made an adjustment of Rs. 89,13,463/-. 6. The taxpayer during the year under assessment also provided trade facilitation services to its AEs qua which crude palm oil was purchased from AEs and sold to JMD Oil P. Ltd., an unrelated entity, on cost to cost basis and only after getting commission of US$ 2 per Metric Ton (MT) from AEs. The taxpayer in order to benchmark this transaction used CUP as in the commodity market, facilitation charges are to the tune of US$ 1 per MT which was less than the commission charged from the AE and thus found this transaction at arm's length. However, ld. TPO after analyzing all functions, risk and assets utilized proceeded to conclude that the transaction for purchase of crude palm oil from AEs and sale to the entity was a "pure trading activity" but camouflaged as "distribution services" and thereby benchmarked with the purchase price prevailing on the date of import in the open....
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....be taken by the aggrieved party at any stage of the proceedings before the judicial/quasi judicial bodies, particularly when assessee has come up with the pleading that TP order and consequent assessment order has been passed beyond the period of limitation. So, application raising additional ground by the taxpayer is allowed without prejudice to the merits of this case. 12. Since taxpayer has raised jurisdictional issue which goes to the roots of the case, we would decide the additional ground no.5 first before going into the grounds raised on merits. 13. Ld. AR for the taxpayer challenging the impugned order passed by the AO/DRP/TPO contended inter alia that the order passed by the ld. TPO dated 31.01.2013 was barred by limitation and as such, consequent assessment order is also not sustainable; that the last date to pass the transfer pricing order by the ld. TPO was 29.01.2013 and not 30.01.2013 as contended by the Revenue; that the order passed by the ld. TPO is barred by limitation as the period of 60 days is to be computed in accordance with the provisions contained u/s 153 of the Act by excluding the last date and relied upon the decision rendered by the Hon'ble Madras Hig....
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....submission of the revenue is to the effect that limitation expires only on 12 a m of 01.01.2020. However, this would mean that an order of assessment can be passed at 12 a m on 01.01.2020, whereas, in my view, such an order would be held to be barred by limitation as proceedings for assessment should be completed before 11.59.59 of 31.12.2019. The period of 21 months therefore, expires on 31.12.2019 that must stand excluded since Section 92CA(3A) states 'before 60 days prior to the date on which the period of limitation referred to Section 153 expires'. Excluding 31.12.2019, the period of 60 days would expire on 01.11.2019 and the transfer pricing orders thus ought to have been passed on 31.10.2019 or any date prior thereto. Incidentally, the Board, in the Central Action Plan also indicates the date by which the Transfer Pricing orders are to be passed as 31.10.2019. The impugned orders are thus, held to be barred by limitation." 20. In the instant case, ld. AR for the taxpayer contended that the period of 60 days is to be computed as per table given below :- Date of assessment order 31.03.2013 No. of Days in March 30 No. of Days in February 28 No. of Days in January ....
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.... provision thereafter. Sub-section (3A) of section 92CA containing the relevant time limit for the passing of the order by the TPO, reads as under : - `(3A) Where a reference was made under sub-section (1) before the 1st day of June, 2007 but the order under subsection (3) has not been made by the Transfer Pricing Officer before the said date, or a reference under subsection (1) is made on or after the 1st day of June, 2007, an order under sub-section (3) may be made at any time before sixty days prior to the date on which the period of limitation referred to in section 153, or as the case may be, in section 153B for making the order of assessment or reassessment or recomputation or fresh assessment, as the case may be, expires.'. 6.3. It transpires from a reading of the above provision that where a reference is made to the TPO after 1.6.2007, an order under sub-section (3) may be made at any time before 60 days prior to the date on which the period of limitation referred to in section 153, or, as the case may be, in section 153B, for making the order of assessment or re-assessment, etc., expires. 6.4. The ld. DR vehemently contended that the use of the word `may' ....
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....s Act, where under the provisions of section 7 read with the rules made under this Act or, as the case may be, the rules in Schedule III, the market value of any asset is to be taken into account in such assessment, the Assessing Officer may refer the valuation of any asset to a Valuation Officer- (a) in a case where the value of the asset as returned is in accordance with the estimate made by a registered valuer if the Assessing Officer is of opinion that the value so returned is less than its fair market value; (b) in any other case, if the Assessing Officer is of opinion- (i) that the fair market value or the asset exceeds the value of the asset as returned by more than such percentage of the value of the asset as returned or by more than such amount as may be prescribed in this behalf; or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do'. In Raj Paul Oswal vs. CWT (1988) 171 ITR 489 (P&H), there arose a quarrel as to the meaning of the word `may' used in section 16A in the context of making reference to the Valuation Officer. Settling the controversy, the Hon'ble High Court held that the word `may' use....
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....f the word `may' in sub-section (3A) of section 92CA is to be construed as `shall', thereby making this time limit as mandatory and not directory. As such, it is held that the TPO is bound by the given time limit for passing of his order. 6.9. Having held that the word `may' in section 92CA(3A) should be read as `shall', we once again note that prior to the insertion of section 144C by the Finance Act, 2009, the time limit for completion of assessment was contained in section 153 and accordingly the time limit for the passing of the order by the TPO was also set out accordingly in section 92CA w.r.t. the time limit for the completion of assessment as per section 153. However, with the insertion of section 144C, the time limit for the completion of assessment, or in other words, for passing of the final assessment order, stood shifted to sub-sections (4) or (13) of section 144C and got detached from section 153. Along with this, passing of draft order also became mandatory, for which we have held above that the same is required to be passed within a reasonable time and it has got no relation with the time limit given in section 153. When the position is such that ....
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....consequence of the above scenario is that the passing of a valid and properly timed draft order cannot lead to the setting aside of the final assessment order. However the passing of the time barred order by the TPO, which is again a mandatory procedure prescribed under the Act, would be a non-curable defect, having the consequence as if it was not passed. In such circumstances, though the final assessment order would be saved but the addition on account of transfer pricing adjustment arising from the determination of the ALP of the international transactions by the TPO as emanating from his time barred order, would be unsustainable. We hold accordingly and direct the deletion of addition on account of transfer pricing adjustment made in the final assessment order." 22. Ld. DR for the Revenue, on the other hand, contended that the ld. TPO has passed order in this case well within time but due to inadvertence date of order is written as 31.01.2013 instead of 30.01.2013 and relied upon copy of dispatch register, wherein file of the instant case is reported to be sent to DIT for approval vide dispatch no.897 on 30.01.2013. 23. We are unable to agree with the contention raised by th....